Symbol Matches

Symbol Starts With

Company Matches

Stocks after the downgrade

By Ken SweetAugust 7, 2011: 5:28 PM ET

Stocks have fallen sharply since mid-July on concerns the U.S. economy may be slowing. Click the chart for more market data.

NEW YORK (CNNMoney) -- Standard & Poor's decision late Friday to downgrade the United States' credit rating sparked fear and many questions: Would stocks tank, first in Asia Sunday night and then in New York Monday morning? Would interest rates on U.S. Treasuries spike higher?

Consensus from economists and investment strategists built quickly that while there could be an initial shock, the downgrade itself should not impact markets too much.

"S&P doesn't know anything that investors don't already know, so the downgrade should not change expectations and interest rates," said Martin Feldstein, Harvard economist and former head of the National Bureau of Economic Research.

Still, the relative optimism came with a big, fat caveat: It is unprecedented for the U.S. to not have a AAA credit rating.

"We've never been through this before. People don't know what to expect," said Ted Weisberg of Seaport Securities, who has spent decades on the floor of the New York Stock Exchange. "So you have to be careful."

And besides, even if investors shrug off the downgrade, there are plenty of other issues that could weigh on markets.

"The initial reaction when the financial markets open on Monday could be severe," wrote Paul Dales of Capital Economics in a note after the downgrade. "Overall, though, we think that any adverse market reaction will be temporary. Once the dust settles, attention will turn back to the economic fundamentals."

Because of the growing fears about the economy falling back into recession, the latest policy announcement from the Federal Reserve on Tuesday will be key.

While the Fed is expected to leave interest rates at near-zero levels, the recent dismal economic data is making investors speculate that the Fed may need to consider additional stimulus.

"There are levers that the Fed can use like QE3, but the question is whether the Fed sees the need to pull them," said Bruce McCain, chief market strategist with Key Private Bank.

For investors, the other question is whether the Fed sees the recent bad economic data like the second-quarter GDP report, or July's ISM manufacturing report as just temporary setbacks or whether the U.S. economy is slowing.

Wednesday -- Dow member and technology giant Cisco Systems reports its quarterly results after the closing bell. Analysts are looking for it to report a profit of 38 cents a share, according to Thomson Reuters.

The sole economic report out on Wednesday is June wholesale inventories, which are expected to rise 1%.

Thursday -- Investors will get the Labor Department's weekly jobless claims report and U.S. trade balance figures at 8:30 a.m. ET. The number of people filing for unemployment benefits is expected to climb to 409,000 and economists expect the U.S. will post a $48 billion trade deficit for June.